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INDIAN BAKERY INDUSTRY

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Thursday, July 19, 2012

The Indian bakery industry is dominated by the small-scale sector with an estimated 50,000 small and medium-size producers, along with 15 units in the organized sector. Apart from the nature of the industry, which gravitates to the markets and caters to the local tastes, the industry is widely dispersed also due to the reservation policies (relating to the small scale industries) of the government.

Biscuits and bread which are considered to be the major bakery product and they account for 82% of all bakery production. The unorganized sector accounts for about half of the total biscuit production estimated at 1.5 million tonnes.  It also accounts for 85% of the total bread production and around 90% of the other bakery products estimated at 0.6 million tonnes. The last includes pastries, cakes, buns, rusks and others.

Biscuits are estimated to enjoy around 37% share by volume and 75% by share by value of the bakery industry.  The organized sector caters to the medium and premium segments, which are relatively less price-sensitive.  The organized sector is unable to compete at the lower price range due to the excise advantage enjoyed by the informal sector. The organized segment in biscuits has witnessed a steady growth of about 7.5%, conforming broadly to the growth rate of GDP.

 Biscuits constitute about 7% of the Rs 478 billion FMCG markets in India. During 2003-04 biscuits market grew at double digit (about 11%) compared to a growth of 1.4% for the FMCG industry as a whole, and 4.4% average growth over last five years (1999-2003).

 In India the annual per capita consumption of branded confectionery is still under 100 gms.  Hard-boiled candy is reserved for the small-scale sector.  There are about 5,000 units catering to the local markets.  The big players have used a mix of franchise arrangements (with small units) and product formulations to get out of the reservation mode.

 The total contribution of the sugar boiled confectionery market in the organized sector, comprise plain, hard-boiled candies, toffees, éclairs and gums is around Rs. 20 billion. Add to this the unorganized sector and the market for all types of confectionery is Rs. 50 billion.  However, in terms of value the organized sector commands 60% of the market share. With the exit of MNCs and other established organized players from very low priced (25 paise) category, the unorganized sector has grown very fast. MNCs and high-powered advertising support substitute products like chewing and bubble gums.  With Rs. 3,250 million market shares, the gum and mint market is growing at a rate 10 to 15% annually.  Fruit and mint rolls being marketed by companies with sound strategies are going ahead rapidly.

 Biscuits

Demand: Past and Future

Year                 Thousand MT

2000-01          1110

2001-02          1188

2002-03          1307

2003-04          1444

2004-05          1523

2005-06          1607

2006-07          1696

2007-08          1804

2008-09          1920

2009-10          2043

2014-15          2758

 

Market Structure

Market Segmentation

Segment      Share (%)

Organised   50

Informal       50

North            36

East               19

West              23

South           22

 

 

Market Growth Rates

1990-91 - 1996-97            5.5%

1996-97 - 2001-02            5.8%

2001-02 - 2006-07            7.4%

2004-05 - 2009-10            6.4%

2009-10 - 2014-15            6.2%

 

 

Bread

Demand: Past & Future

Year                   Rs bn.

2000-01           11.90

2001-02           12.85

2002-03           13.85

2003-04           14.80

2004-05           15.85

2005-06           16.90

2006-07           17.90

2007-08           18.95

2008-09           20.00

2009-10           21.10

2014-15           26.90

 

Market Structure

Market Segmentation

Segment                        Share (%)

Organised                     15

Informal                         85

North                              35

East                                 10

West                                30

South                             25

 

Market Growth Rates

1990-91 - 1996-97    5.4%

1996-97 - 2001-02    7.9%

2001-02 - 2006-07    6.9%

2004-05 - 2009-10    6.0%

2009-10 - 2014-15    5.0%

 

Product Variation

Segment                                           Share (%)

Milk Bread                                      85

Brown Bread                                  10

Fruity                                                3

Nutritional and other specialty           2

Source: Ministry of Food Processing Industries

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